India's gold market is witnessing a fundamental shift as domestic prices reach record highs, prompting consumers to abandon traditional ornament purchases in favor of investment-grade products. The dramatic price surge is reshaping centuries-old buying patterns, with buyers increasingly prioritizing liquidity and cost-effectiveness over ceremonial jewelry.

Dramatic Price Rally Reshapes Consumer Behavior

Gold prices increased by 77% in India during 2025, significantly outpacing the Nifty 50 index's 9.7% gain. This exceptional performance has forced consumers to reconsider their traditional approach to gold purchases, particularly for weddings and festivals where ornaments were previously preferred.

Mumbai resident Prachi Kadam exemplifies this behavioral shift, telling Reuters: "It's hard to justify paying an additional 15% in making charges. So, I settled for a 10-gram coin this time." Her decision reflects growing consumer resistance to the premium costs associated with jewelry manufacturing.

Investment Demand Surges While Jewellery Sales Decline

World Gold Council data reveals the extent of this market transformation during the first nine months of 2025:

India-listed gold exchange-traded funds experienced remarkable growth, attracting ₹27,720 crores ($3.3 billion) in inflows equivalent to 28.7 tonnes. This brought total ETF holdings to 86.2 tonnes, demonstrating strong institutional and retail investor interest in gold-backed financial products.

Industry Adaptation and Consumer Strategies

Jewellers are responding to changing preferences by introducing innovative products. PN Gadgil Jewellers launched a lighter, lower-carat sub-brand in June to address price sensitivity. Chairman Saurabh Gadgil explained to Reuters: "Buyers want pieces that allow them to participate in gold ownership without feeling price pressure, and modern craftsmanship has made lightweight jewellery aspirational rather than entry-level."

Consumers are employing various cost-management strategies:

• Purchasing investment-grade bars and coins instead of ornaments
• Reducing jewelry weight to manage expenses
• Choosing lower-carat alternatives (18-carat and 14-carat pieces)
• Investing in gold ETFs for portfolio diversification

Kolkata resident Nibedita Chakraborty highlighted the financial impact, noting that "reducing the weight of a gold necklace by six or seven grams can save more than ₹1,00,000."

Market Outlook and Industry Predictions

Industry representatives expect this trend to persist for at least two years, mirroring patterns observed in international markets where high prices discourage ornament purchases. The India Bullion and Jewellers Association predicts continued price strength, with President Prithviraj Kothari stating: "Consumers are purchasing gold in the form of coins, bars or gold ETFs, assuming that the rally will continue."

Manufacturers report growing popularity of lower-carat pieces, particularly among younger consumers. DP Abhushan Ltd Chairman Santosh Kataria observed: "These pieces allow buyers to manage budgets while still enjoying appealing designs."

Analysts suggest that if gold continues outperforming other asset classes, the shift toward investment products may become permanently established, fundamentally altering India's traditional gold consumption patterns.

Gold and silver continued their exceptional momentum into 2026, with both precious metals posting strong gains on Friday as trading resumed following the holiday period. The metals are building on their record-breaking 2025 performance, supported by sustained institutional demand and multiple fundamental drivers.

Latest Trading Performance

Spot gold rose 0.9% to $4,351.70 per ounce on Friday, while spot silver jumped 2% to $72.63 per ounce. The strong Friday performance demonstrates continued investor appetite for precious metals as portfolio diversifiers and inflation hedges.

Record-Breaking 2025 Performance

Both metals delivered exceptional returns, with gold marking its largest annual gain in 46 years at 64%, while silver recorded its highest-ever yearly increase of 147%. Platinum achieved its largest annual gain ever at 127%, and palladium posted its best performance in 15 years with a 76% increase.

Analyst Perspectives and Market Drivers

Analysts attribute the sustained rally to multiple fundamental factors. Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho, said the metals rally highlights demand for "hedges against entrenching USD debasement risks."

Inderbir Singh Jolly, CEO of PL Wealth, emphasized the structural nature of the current rally. "The rally is not driven by short-term speculation but by sustained investment flows and continued central bank purchases," he noted, adding that elevated geopolitical risks, stretched equity valuations, and currency volatility have reinforced gold's role as a strategic hedge.

Rajeev Sharan, head of research at Brickwork Ratings, highlighted silver's historic surge, noting that the 140% increase mirrored gold's strong performance and pointed to broader shifts in portfolio positioning by investors and nations.

Market Outlook and Potential Challenges

Looking ahead, analysts expect gold and silver to remain supported by underlying factors including sustained central bank buying, robust ETF inflows, geopolitical uncertainty, and concerns over currency and inflation trends. Gold is likely to hover in the $4,500-5,000 per ounce range, with silver continuing to benefit from sustained investor interest.

However, some near-term challenges remain. Daniel Ghali, a senior commodity strategist at TD Securities, noted potential selling pressure from portfolio rebalancing, writing: "We expect a massive 13% of aggregate open interest in Comex silver markets will be sold over the coming two weeks, to result in a dramatic repricing lower."

Despite potential short-term consolidations, the fundamental drivers supporting precious metals remain intact, with analysts expecting continued strength based on structural shifts in investor behavior and ongoing macroeconomic uncertainties.